ABSTRACT
One of the chief objectives of economic theory is to explain the working of the economy as a whole, by identifying and if possible measuring the forces that cause the nation's total output and level of employment to be what they are. When, however, supply and demand are aggregated for the economy as a whole, the feedback can no longer be ignored. Aggregate supply and demand are thus linked through the intermediary of income. On the side of aggregate supply, the relationship with income normally requires only one important distinction to be made: that between those goods and services produced within the country and those imported from overseas. Though the aims of macroanalysis and microanalysis are different, both make use of the concepts of supply and demand and the equilibrium that may be established between them. Where macroanalysis simplifies by aggregation, microanalysis does so by assuming "other things equal.".
